Business confidence in India at decade high of 74: FICCI

9 March, 2021 12:00 AM printer

NEW DELHI: Business confidence in India has risen 3.3 points to 74.2 compared to 70.9 in the previous survey, due to “expectations, improved demand, improved capacity utilisation, and promising outlook on operational parameters,” the Federation of Indian Chambers of Commerce & Industry (FICCI) said.

Notably, the industry body’s Overall Business Confidence Index saw a 15.2 points jump over last year’s 59, it said on March 7, report agencies.

On constraints, it noted that demand has largely regained due to pent-up demand during the lockdown, and rising raw material costs – such as fuel and other commodities is “emerging as a bothersome factor” for India Inc. and is “exerting pressure on the input costs of companies.”

Survey participants “near-unanimity” cited high input cost as a top concern for 2021. Particular factors for this were lack of affordable credit, manpower expenses and weak demand conditions.

“This along with high interest costs on loans, higher inward and outward transport and logistics costs, greater compliance burden on the back of frequently changing statutory compliances and increased manpower costs are further pushing the cost of doing business in India,” FICCI stated.

The body noted that concerns “do not bode well in the current environment” as the global supply chains shift and respondents pointed out that unaddressed trade policy issues could create “even bigger challenge with China and others include Vietnam” for market share.

Another concern noted was “lack of adequate export incentives,” which is making it difficult for Indian entrepreneurs to compete globally.

However, improvement in conditions and expectations from a “forward looking Union Budget 2021” and the Atmanirbhar Bharat packages have “infused optimism” leading the index to a decade high, FICCI added.

The body also noted that improved economic conditions and greater pricing power are “likely to drive corporate India’s profits for the next two quarters” as 36 percent respondents cited increased profits this time, compared to 33 percent in the previous round.

“Discernible improvement” was also noted in regards to employment with 35 percent participants being “optimistic” over hiring prospects in the next two quarters, from 22 percent earlier.

For exports, 41 percent reported “better” and higher outbound shipments compared to 27 percent in the earlier round. Further, participants reporting “higher to much higher investment” also rose.

In terms of capacity utilisation rates, the current survey had 77 percent reporting over 50 percent rates, compared to 68 percent earlier.